The Naughty Or Nice List

My grandchildren were here for Christmas and it was amazing how much they focused on whether they were on Santa’s “Naughty or Nice List”. After all, getting Furby Boom would make the difference between a successful or disappointing holiday so being good was paramount, for at least a few days. It struck me then that lenders are also faced with their own perpetual Naughty or Nice List. Only ours is not compiled by a jolly elf trying to bring happiness, but from a group of regulators trying to bring lenders’ into a transparent lending environment.

The CFPB has made it quite clear that they are collecting data from lenders, consumers and other resources. And the more data they collect the more they know about every company. So have you ever asked yourself, “What are they doing with all that data?” Or, “What do they know that I don’t?” Or, “Shouldn’t I at least know what they know?” and probably most importantly, “Ho, Ho, Ho – How can I know?” Having, using and understanding data seems to the key.

Having and using data is becoming a critical part of the day-to-day activities in any organization. On Sunday, January 12th, The Wall Street Journal included in an article on skills sets necessary in today’s job market, the need for understanding data and noted that it is “… an increasing important part of everybody’s day-to-day…” It is quite clear that everyone needs to understand data and know how it applies to you. Even more important is the need to make sure you even have the right data. This goes double for CEOs and other members of the executive management team.

So what data should management have and how should they use it to keep themselves off the “Naughty” list? All too often the only data that management members see are the production results. But is that all they really need to see? Maybe these executives should know what “big data” they need in order to give them a broader view of the organization. And just maybe they should be thinking about the data that the CFPB has collected on them and the borrowers they serve. An even more radical idea is to get industry data as well. That way it’s easy to compare your organization to everyone else and know how you stack up.

Unfortunately data is not something easily attained in this industry. We have acknowledged that data elements are not consistent and despite the best efforts of MISMO, there are still lenders who have and/or want to maintain their own propriety data. We also have systems that are inadequate at collecting the data we need and only recently have we begun to make sure the data we do have is accurate. So are lenders doomed to face regulators not knowing if they have been good or bad? What can lenders do today to give themselves a fighting chance to make it to the “Nice” list?

One way is to make use of the data that is available. Every lender now files HMDA data for example and that collective industry data is publically available. Yet how many lenders have actually used their data or the combined database to analyze their organization? How many lenders know how they compare to the industry when it comes to such things as sending our incompleteness notice or denial reasons? Well, the CFPB knows and if you are on the low end of the numbers you are certainly a “Naughty” list prospect. And that means, not just coal in your stocking, but exams and probably fines in your future.


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